What is the bond yield to maturity

Assignment Help Financial Management

Reference no: EM132046058

Rierson owns a garment factory in Spain and sells designer clothes to US and other European countries. He is trying attract some investments from US that he can use to expand further into the US market. US investors are looking for stable cash flow, which is going to be a challenge given that the fashion industry is changing constantly and he can get stuck with unsold inventory. To allay their fears, Rierson decides to investment some of the capital raised into Italian 10 year Government Bonds. He explains that the return from these bonds will be used to improve his operations. Ignoring currency exposure, consider the following:

He decides to invest into ten year 1,000 EURO Government bond with 8% coupon rate and semi-annual coupons. If the bond is currently trading for a price of 957.35 Euros, what is the bond’s yield to maturity? Assume is buys 10,000 of these bonds.

Suppose he is told that the yield to maturity has increased to 15% (expressed as an APR with semiannual compounding). What price is the bond trading for now?

Reference no: EM132046058

Questions Cloud

What is the amount of the next dividend : One-third of the return on this stock is derived from dividends and the other two-thirds is derived from capital gains. What is the amount of the next dividend?

Determine how learning can be maladaptive : After you have completed the Reading, and without reviewing your classmate's responses, post your initial response to the following Discussion.

An organization wants to put some money in savings : If an organization wants to put some money in savings for the next 5 years at 4.5% interest,

What ethnic and diversity issues might be present : What ethnic and diversity issues might be present? What are some of the issues related to the field being male-dominated that you might address in therapy?

What is the bond yield to maturity : He decides to invest into ten year 1,000 EURO Government bond with 8% coupon rate. what is the bond’s yield to maturity?

How might stress be different for male versus female officer : How might stress be different for male versus female officers? What are some of the unique stressors encountered in law enforcement?

Decides to invest in northern endowment fund : Henry decides to invest in a Northern Endowment Fund that has had a ten year average return of 8.5%.

Relationship between nominal and real interest rates : Determine the real interest rate using the exact relationship between nominal and real interest rates.

Determine net incremental cash inflow : Determine ABC's net incremental cash inflow that would result 11 years from now as a result of building the factory.

User Account

All Pages